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Dividend Tree is an engineering professional working in wireless industry. After earning his PhD, his professional career has taken him to web-based manufacturing systems, risk/statistical analysis for development and sustainability, product development, and design for excellence. He believes in... More
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  • Three Companies with Sustainable Dividends 0 comments
    Oct 27, 2009 10:07 AM | about stocks: BRC, HCC, DOV

    Even in soft economic environment, there are companies out there that are continuing to increase dividends for their shareholders. While dividend increase is good, it is more critical to make sure we understand that companies can sustain their dividends. Following are four companies that recently announced their quarterly results and increased dividends.

    Brady Corp (BRC): It is a dividend achiever and has paid increasing dividends for last 24 years. Most recent dividend increase of 2.9% was in September 2009.

    The 4Q09 earning per share was $0.37 (vs. $0.64 in 4Q08).

    • The key highlight was $127million cash flow from operations.
    • For year 2009, EPS was $1.33 (vs. $2.41 in 2008) which includes all restructuring charges.
    • The 2010 earnings expectation is $1.60 to $1.80.
    • Yearly dividend of $0.70/share appears to be well covered with earnings.
    • This payout ratio is at 47% and current dividend yield is 2.30%

     


    HCC Insurance Holdings Inc. (HCC): It is a dividend achiever and has paid increasing dividends for last 13 years. Most recent dividend increase of 8% was in August 2009.

    • The 2Q09 earning per share was $0.81 (vs. $.79 in 2Q08).
    • The key aspects were flat revenue, decrease in new premium underwritings, and increase in EPS due to 4.7 million share repurchases.
    • The quarterly dividend of $0.135/share and hence annual dividends of $0.54/share appears to be covered with earnings of.
    • The payout ratio is 33% and current dividend yield is 2.0%.


     

    Dover Corporation (DOV): It is a dividend aristocrat and member of broad dividend achiever. It has been raising dividends for last 55 years. The most recent dividend increase of 4% was in August 2009.

    • The year 2Q09 earnings per share was $0.54 (vs. $0.98 in 2Q08).
    • The revenue decrease by 31% year-over-year. This is due to weaker end market.
    • The highlights were increased operating margins and free cash flow.
    • Quarterly dividend of $0.26/share and hence annual dividend of $1.04/share seems to be well covered with earnings.
    • This quarter’s payout ratio is 48% and current dividend yield is 2.7%.

     

    At a high level and in the context of stocks screening, these companies demonstrate ability to cover and sustain their dividends. These increases are well above the inflation level and hence they add up to the real returns over time.

    Themes: dividends, long term ideas, Industrial Stocks: BRC, HCC, DOV
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